Today's Headlines

Bloomberg:

• Banks Hoarding ECB Cash to Double Company Defaults: Euro Credit. Corporate defaults may almost double in Europe as companies struggle to refinance debt and banks hoard cash borrowed from the European Central Bank or use it to buy government bonds. Europe’s default rate may soar to 8.4 percent or more, from 4.8 percent at the end of 2011 as the recession bites and company financing dries up, according to Standard & Poor’s. Petroplus Holdings AG (PPHN) became the latest victim of the tough stance banks are adopting when the region’s biggest independent oil refiner said this week it will file for insolvency after losing access to $2.1 billion of credit lines. “It’s very challenging for anyone to raise money from lenders right now,” said Andrew Cleland-Bogle, a Frankfurt- based director at corporate finance specialist DC Advisory Partners. “Combine that with increased bank capital requirements and you can see that although banks are getting money they’re very selective when it comes to lending it. 2012 is going to be a very, very tough year.” Speculative-grade companies have to refinance about 230 billion euros ($300 billion) through 2015, according to S&P. At the same time, banks and loan funds that provided the initial funding are scrambling for capital or reaching the end of their reinvestment periods and may be unwilling to extend loans. Banks are using the 489 billion euros they borrowed at 1 percent from the ECB under its three-year longer-term refinancing operation to scoop up government bonds yielding more than 2.5 percentage points extra instead of lending the money to companies.
  
• EU Delays Bank Bond Writedown Plans Until Fiscal Crisis Abates. Michel Barnier, the European Union's financial services chief, said he'll wait until the region is “past the worst” of its fiscal crisis before unleashing proposals to write down creditors at failing banks. “We have to get past the worst of this crisis to present this proposal at the right moment,” the European Commissioner said in a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland. That may be in “some weeks, or rather some months.”
• Socialist Hollande Pledges Tax Breaks End, Eased Pension Measure. Francois Hollande, the Socialist candidate seeking to unseat President Nicolas Sarkozy, pledged to ease the government’s pension overhaul and increase taxes to pay for the reversal. Hollande, 57, the frontrunner in the presidential campaign, advocated forcing banks to separate retail and investment operations. He’ll raise levies on the wealthy to finance an expansion of the civil service while respecting budget-cutting commitments. The measures were among 60 in a platform published today. “We must make an effort for more fairness and to rein in the financial industry,” Hollande said in Paris. “We will separate the speculative sector from the credit sector.”
• China Says Sanctions on Iran Not 'Constructive,' Xinhua Reports. China said sanctions on Iran’s oil exports are not “constructive” and urged relevant parties to settle international disputes through dialogue, the official Xinhua News Agency reported today, citing comments from the Ministry of Foreign Affairs. The ministry made the comment after the European Union decided on Jan. 23 to place an embargo on Iran’s oil exports, and to introduce a number of other financial sanctions, the report said.
• Crude Oil Surges as Fed Commits to Low Rates. Futures advanced above $100 a barrel as Fed Chairman Ben S. Bernanke said yesterday that policy makers are considering more bond purchases to boost growth after extending the pledge to maintain interest rates. Crude oil for March delivery rose $1.07, or 1.1 percent, to $100.47 a barrel at 12:29 p.m. on the New York Mercantile Exchange. Prices touched $101.39, the highest level since Jan. 19. Futures are up 15 percent in the past year. Brent oil for March settlement climbed $1.17, or 1.1 percent, to $110.98 a barrel on the London-based ICE Futures Europe exchange.
• IRS Should End Commodity Mutual-Fund Runaround, Levin Says. U.S. tax authorities should stop a private rulemaking process that has encouraged speculation in oil and agricultural markets by letting mutual funds exceed limits on commodity investments, Senator Carl Levin said. The Internal Revenue Service’s so-called private letter rulings, which let funds use foreign corporations and other strategies to escape the tax implications of boosting commodity holdings above 10 percent of assets, are a “runaround” of the law that reflects a “tortured reading,” Levin said at a news conference yesterday.
• First-Time Jobless Claims in U.S. Increase. Applications (INJCJC) for unemployment insurance payments climbed by 21,000 to 377,000 in the week ended Jan. 21, up from an almost four-year low in the prior period, Labor Department figures showed today in Washington. The median forecast of 47 economists in a Bloomberg News survey projected 370,000. The four-week moving average, a less volatile measure than the weekly figures, fell to 377,500 last week from 380,000. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 2.8 percent from 2.7 percent, today’s report showed.
• U.S. Durable Goods Orders Beat Expectations. Orders for U.S. durable goods climbed more than forecast in December, pointing to a rebound in business investment that will help support the world’s largest economy in early 2012. Bookings (DGNOCHNG) for long-lasting goods advanced 3 percent after rising 4.3 percent the prior month, the biggest back-to-back gains in almost a year, according to Commerce Department data today in Washington.
• New Home Sales in U.S. Fell in December. Sales of new U.S. homes unexpectedly declined in December for the first time in four months, capping the slowest year on record for builders.

Wall Street Journal:

• U.S. Money-Market Funds Cut Euro Zone Bank Debt Holdings. U.S. money-market funds held less debt from banks in the euro zone at the end of 2011 than at any point since at least 2006, according to a Fitch Ratings survey. These funds, among the most conservative and largest lenders, now hold $64 billion, or 10% of their total assets—$644 billion at the end of December—in euro-zone bank debt.
  
• Watchdog: Treasury's 2008 Financial Rescue Could Last Until 2017. The U.S. government's rescue of the financial system could last for five more years as the Treasury Department unwinds its investments in hundreds of banks and other companies propped up in the aftermath of the 2008 financial crisis, a government watchdog said Thursday. The Bush administration launched the financial rescue plan in the autumn of 2008 at the height of the financial crisis. At its launch, Congress authorized spending $700 billion on the bailout known as the Troubled Asset Relief Program, or TARP.
• Portugal 5-Yr CDS Wider At Fresh Record High Of 1365 - Markit. The cost of insuring Portuguese debt against default rose to a fresh record high Wednesday, building on records hit this week as investors remain wary due to a lack of clarity on Greece's debt restructuring talks. Portugal's five-year credit default swaps--derivatives that function like a default insurance contract for debt--hit 1365 basis points, 71 basis points wider to Tuesday's close, according to data provider Markit. Portugal was recently downgraded to "junk" by all three major credit rating companies. Portugal is dramatically underperforming the iTraxx SovX Western Europe index--which investors can use to buy or sell credit default swaps on a basket of 15 sovereign borrowers--which at 1238 GMT was eight basis points tighter at 317/322.
  

MarketWatch:

• Monster Worldwide(MWW) to Cut 7% of Jobs. Monster Worldwide Inc. MWW -18.15% reported disappointing fourth-quarter results and gave a downbeat outlook as its chief executive said uncertainty about the economy's direction continues to weigh on hiring. The job-search software maker also said it plans to cut its workforce by 7%. "One thing business doesn't like is indecision," Monster Chief Executive Sal Iannuzzi said in an interview. "We are in a very confused period in terms of whether the economy will stay status-quo or improve or deteriorate further." The results indicated that despite some recent signs of economic stabilization in the U.S., the company's customers remain uneasy.

CNBC.com:

• Participants in the World Economic Forum have an attitude to the financial crisis similar to "rearranging the deck chairs ion the Titanic," William Browder, founder of Hermitage Capital Management, said.
• Is Fed Move a Sign to Buy Defensive Stocks?
  

Business Insider:

• How Rich Is Warren Buffett's Secretary, Really?
• European Banks May Soon Have to Write Down $100 Billion Worth Of Bad Shipping Loans.
  

Zero Hedge:

• Portugal 10 Year Yield Passes 15% For The First Time, Is Where Greek 10Y Was In August. (graph)
• Baltic Dry Plunges 42% More Than Seasonal Norm To Start The Year. (graph)
• Taxpayers Lose Another $118.5 Million As Next Obama Stimulus Pet Project Files For Bankruptcy.
• Has Bernanke Become A Gold Bug's Best Friend?
  

cnet:

• Next Xbox to Prevent You From Playing Used Games? Gaming news site Kotaku reported yesterday that the so-called Xbox 720 will incorporate some type of anti-used game technology. Citing a "reliable industry source," Kotaku admitted that it's not clear how such a technology would be set up and if it means the Xbox wouldn't play used games at all.

Denver Post:

• Hedge Funds Regret Buying Greek Debt. Hedge funds that loaded up on Greek bonds in the past month — betting on a quick gain — are scrambling to sell those holdings, fearful that European policymakers will force them to take a deep and binding haircut on the debt. But walking away from the trade may not be that easy. While the money managers had little problem snapping up the bonds from European banks eager to sell, the pool of potential buyers is drying up.

Bespoke Investment Group:

• Bearish Sentiment Drops Below 20%. (graph)

Reuters:

• JPMorgan(JPM) CEO Says Foreclosure Deal Threatened. JPMorgan Chase & Co Chief Executive Jamie Dimon said President Barack Obama's decision to expand investigations into home lending and sales of mortgage securities could stop settlement talks with the states over foreclosure practices. "It has a pretty good chance of derailing it," Dimon said in a televised interview with CNBC from Davos, Switzerland on Thursday.

Telegraph:

• China's Very Mysterious Data. (graphs) I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc. The Shanghai Container Freight Index fell 1.4pc to a record low of 919.44 in November, after sliding relentlessly for several months.
• Spain's Finance Minister Cristobal Montoro Admits Unemployment Rate Has Jumped to 24%.
  

Financial Times Deutschland:

• India may place sanctions against Deutsche Lufthansa AG, Air France-KLM, and British Airways to protest the EU's emissions trading system for airlines.

Cicero:

• European Central Bank Governing Council member Jens Weidmjann said any "large scale" bond purchases by the ECB would damage the euro, citing an interview. Weidmann was quoted by the magazine as saying that turning the ECB into a lender of last resort for governments would "endanger the existence of the currency union as a union of stability."

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.70%

Sector Underperformers:

• 1) Education -3.80% 2) Disk Drives -3.0% 3) Banks -2.20%

Stocks Falling on Unusual Volume:

• PRU, ZION, COG, CRR, CRK, ASBC, HUM, HES, VIV, HMY, DRE, TV, MNTA, SNDK, BVSN, NUVA, SIMO, CEVA, ILMN, TCBI, CTXS, TZOO, SPPI, COLB, WRLD, CLNE, SLAB, LRCX, OSIS, CVD, VAR, CY, PCP, RES, EGN, KRE, PL, BKI, CMA, LNC, ESI, BGG and FTK
  

Stocks With Unusual Put Option Activity:

• 1) JCP 2) TWC 3) LRCX 4) UA 5) MET
  

Stocks With Most Negative News Mentions:

• 1) ETFC 2) CHK 3) GLW 4) SCHW 5) MWW
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Large-Cap Growth -.10%

Sector Outperformers:

• 1) Airlines +2.25% 2) Gold & Silver +1.69% 3) Steel +1.19%

Stocks Rising on Unusual Volume:

• MLNX, TWC, TER, RGLD, CAT, CTCM, NGD, MITI, ACAT, PMTC, NFLX, YNDX, VPRT, MPEL, JCP, GHL, URI, UAL, WCC, ZMH, CBG, MJN, KNX, HSC and OI
  

Stocks With Unusual Call Option Activity:

• 1) ADI 2) LSI 3) CSTR 4) SNDK 5) UA
  

Stocks With Most Positive News Mentions:

• 1) NFLX 2) TWC 3) ETN 4) LSI 5) KNX
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Thursday Watch

Evening Headlines

Bloomberg:

• Greek Debt Talks to Resume in Athens as Policy Makers Squabble Over Cost. Talks on a debt swap to avert a Greek default resume today as international policy makers squabble over the mounting cost of the rescue. Charles Dallara and Jean Lemierre, negotiating on behalf of private creditors, return to Athens today after European finance ministers insisted bondholders take bigger losses on their Greek debt. The International Monetary Fund further roiled the discussions by suggesting that public holders of Greek bonds might also have to increase support. The parties are groping for a solution three months after private bondholders agreed with European officials to implement a 50 percent cut in the face value of more than 200 billion euros ($262 billion) of debt by voluntarily swapping bonds for new securities. Since then, an economic contraction that exceeded estimates has made the goal of cutting Greece’s debt to 120 percent of gross domestic product by 2020 harder. An accord is tied to a second bailout for the country, which faces a 14.5 billion-euro bond payment on March 20. “The cost of postponing a solution is extremely high for Europe, but especially for the future of the euro,” said Giovanni Bossi, chief executive officer of Banca Ifis SpA, an Italian financial-services company that doesn’t own Greek debt. “The parties are very close to a deal -- it’s time to close.”
• Gold Surges to Six-Week High on Fed's Forecast for Low Borrowing Costs. Gold futures surged to a six-week high after the Federal Reserve said it expects “exceptionally low” interest rates through at least late 2014. Silver, platinum and palladium also advanced. Fed Reserve Chairman Ben S. Bernanke said at a press conference after the central bank’s statement that the option of further large- scale bond purchases is still “on the table.” Gold has jumped 28 percent in the past 12 months, partly as record-low rates boosted the appeal of the metal as a hedge against inflation. “We saw an immediate reaction in gold” after the Fed’s announcement, Michael A. Gayed, the chief investment strategist who helps oversee $150 million at New York-based Pension Partners LLC, said in a telephone interview. “People are betting that at some point the economy will face inflationary pressures because of the low interest rate.”
• CBOE Put-Call Ratio Hits Eight-Month Low on Stock Rally: Options.. The ratio of bearish versus bullish options changing hands on the CBOE slipped to the lowest level since May as traders piled into the S&P 500 Index's rally amid the measure's best start to a year since 1997. The CBOE Equity Put/Call Ratio's average over the past 20 days has dropped to .61 and on Jan. 19 the level fell to .47, according to data from the exchange compiled by Bloomberg.
• U.S. Banks Face Pressure on Margins From Fed Policy on Rates. Bank of America Corp. and Citigroup Inc. are among lenders that may find it more difficult to boost profits and capital after the Federal Reserve pledged to keep its benchmark interest rate low until at least late 2014. “This hurts the banks, I don’t think there’s any question about that,” said Ralph Cole, a senior vice president of research at Ferguson Wellman Inc. in Portland, Oregon, which manages $2.9 billion. “Their cost of funds stays low but it makes it harder to earn a return.” The Federal Open Market Committee said yesterday that economic conditions are likely to warrant “exceptionally low levels for the federal funds rate at least through late 2014.” The policy may hurt lenders’ profits as they struggle to find loans or securities with yields high enough to support their net interest margins, a gauge of profitability that measures the difference between the cost of funds and what they earn on assets.
• SanDisk(SNDK) Drops as Sales Forecast Misses Estimates on Lower Prices. SanDisk Corp. (SNDK) shares dropped in late trading after the biggest maker of flash-memory cards gave a first-quarter sales forecast that missed analysts’ estimates, citing lower prices for chips that store data in mobile phones. Sales in the current period will be $1.3 billion to $1.35 billion, Chief Financial Officer Judy Bruner said on a conference call today. Milpitas, California-based Sandisk was projected to have sales of $1.46 billion, the average estimate of analysts in a Bloomberg survey. The shares declined as much as 11 percent.
• China Police Open Fire on Tibetans. Police in southwestern China opened fire on protesters in a Tibetan enclave during a clash Jan. 24, the second straight day of deadly protests in the area, the official Xinhua News Agency reported. The confrontation occurred after a crowd gathered two days ago near the Chengguan Police Station, Xinhua said yesterday, citing an unidentified police officer. The crowd refused to disperse and then stormed the station with knives, gasoline bottles and stones, according to the report. Police opened fire after attempts to disperse the crowd by non-lethal means failed, Xinhua reported. One protester was killed and another injured, in addition to 14 police wounded, according to the report. “The Tibetan people are unhappy and restive about their lot in China,” Mohan Guruswamy, chairman of the Centre for Policy Alternatives, a New Delhi-based research group, said in an e-mail. “There is ample evidence of it, and the acute Chinese sensitivity to any comment on Tibet is only proof.”
• South Korea's Economy Grows at Slowest Pace in Years. South Korea’s economy grew the least in two years in the fourth quarter as exports sank because of Europe’s sovereign debt crisis and a faltering global expansion. Gross domestic product expanded 0.4 percent from the third quarter, when it gained 0.8 percent, the central bank said in Seoul today. That was less than the median 0.5 percent estimate of 10 economists surveyed by Bloomberg News.
• Logitech Cuts Its Full-Year Forecasts. Logitech International SA (LOGN), the world’s biggest maker of computer mice, cut its forecasts for sales and operating income, citing the weaker euro and decreased demand for products such as web cameras and remote controls. The company changed its sales forecast for the fiscal year ending March 31 to $2.3 billion, with operating income estimated at $60 million. Logitech, which also produces gaming devices, in September cut its forecast for full-year operating profit to about $90 million on sales of about $2.4 billion. “The euro has weakened considerably during the last three months,” Chairman and interim Chief Executive Officer Guerrino De Luca said in the statement. “In addition, webcams and remotes continue to be impacted more than expected by product portfolio and market weakness.”

Wall Street Journal:

• SEC Puts Private Equity Under the Enforcement Microscope. A panel of three members from the SEC’s asset management unit, which was created in 2010 within the agency’s enforcement division, pointed to an increased likelihood of enforcement actions against private equity firms in the coming years. “I think that private equity law enforcement today is where hedge fund law enforcement was five or six years ago,” Robert Kaplan, co-chief of the asset management unit said Wednesday during the Private Equity Analyst Outlook conference in New York. In the past 12 months, the SEC’s enforcement division brought about 50 cases against hedge fund managers, Kaplan said.
• The Development Ladder, Post-Crisis. World Bank Chief Economist Lin Yifu on Industrialization and the Lessons to Learn From Financial Meltdowns.
• How Green Became Obama's Albatross. The president is trapped by his own rhetoric amid America's energy boom. He knows China and India are opening a new coal plant every week. He knows the huge amounts of fossil energy lying at humanity's feet won't be abandoned just because an American president says so. He can't fail to notice that Canada's oil sands won't remain undeveloped; the oil will go to the Far East. Mr. Obama also seems enough of a free thinker to entertain the possibility at least that global warming theory may be wrong. In a telling exchange with interviewer Charlie Rose a few years ago, Al Gore was asked to describe the evidence of man's role in climate change. Each time Mr. Gore recurred to some version of a "consensus of scientists" or "the most respected scientists whose judgment I think is the best." The truth is, the theory may be popular, but the evidence has thus far eluded the tens of billions spent on climate science. The temperature data are so noisy that they reveal no pattern connecting rising CO2 in the industrial age with temperature trends. Some say because CO2 is a "greenhouse" gas, shut up, case closed. But the known relationship between carbon and climate doesn't actually indicate a big reason to worry.
• Lam Research(LRCX) 2Q Profit Slumps 85% On Sharp Sales Drop. Lam Research Corp.'s (LRCX) fiscal second-quarter earnings slumped 85% as the semiconductor-equipment maker's revenue dropped sharply. The company anticipated near-term declines in spending on wafer-fabrication equipment amid an industry slowdown in the second half of last year.
• Uphill Fight Awaits New Mortgage - Fraud Unit. The Justice Department's plan to create a new mortgage-crime unit in tandem with state authorities, announced by President Barack Obama in his State of the Union address, represents the latest move in an effort that so far has led to few prosecutions of bankers. The new unit may help push forward a broad settlement under which banks would pay billions of dollars to resolve charges about "robo-signing" documents and other alleged mortgage abuses. But when it comes to bringing criminal charges against individual executives, the unit is likely to face the same kind of difficulties earlier task forces have encountered.
• Public Pensions Increase Private-Equity Investments. Large public pension plans are pouring more money into private-equity funds, deepening ties between government workers and an industry currently under the harsh glare of U.S. presidential politics. Big public-employee pensions had about $220 billion invested in private equity in September, or 11% of their assets, according to Wilshire Trust Universe Comparison Service, which tracks the holdings of pensions, foundations and endowments.
• The Buffett Ruse. Obama's ploy means the highest capital gains tax rate since 1978. Remember the moment in 2008 when Charlie Gibson of ABC News asked Senator Barack Obama why he would support raising the capital gains tax even though "revenues from the tax increased" when the rate fell? Mr. Obama's famous reply: "I would look at raising the capital gains tax for purposes of fairness." Well, we were warned.
• With EU Embargo on Iran Oil, Chinese Traders Poised to Profit. Europe’s decision to embargo Iranian oil exports is strategically sound, since a nuclear-armed Iran is in no one’s interest. Yet, policymakers are overlooking how an embargo may strategically reshape the global oil trade in China’s favor. Major Chinese oil traders are building businesses that are world class in terms of volumes traded. The latest oil embargo will help them further their ambitions.

Business Insider:

• The US Has Already Lost These Eight Industries To China.
• Indiana House Has Dealt A Huge Blow To Unions In The Rust Belt.
• Tim Geithner Will Not Stay For A Second Term.
• The Troika Are Just Keeping Markets From Panicking And Buying Governments Time.
  

Zero Hedge:

• Market Now Pricing In $770 Billion Increase In Fed Balance Sheet.

CNBC:

• Larry McDonald Calls Portugal CDS a Bear Signal. Action in Portugal’s credit-default swaps might be a telling bear signal, economic expert and author Larry McDonald said Wednesday. While Greece has “backup” private-sector involvement that could buoy its economy, the Portugal CDS 5-Year [PTCD5 1453.03 7.37 (+0.51%) ] was at record levels, McDonald said on “Fast Money.” “It’s decoupling from the rest of the group,” he said. McDonald likened the situation with Portugal and Greece to a financial event horizon in 2008. “The political will to save Lehman Brothers — and I talk about this in my book — was really taken away from Bear Stearns,” he said. McDonald called it a bearish signal in the intermediate term.
• Government Trying to 'Cripple' Banks: Dick Bove. Between the Federal Reserve’s announcement that it will not raise interest rates until at least 2014 and President Obama’s mortgage refinancing plan, the government is trying to cripple the banking system, noted bank analyst Dick Bove told “The Kudlow Report” Wednesday. “What this government is doing is its attempting to restrict or cripple the banking system so it cannot perform the way it wants in terms of assisting the economy,” the Rochdale Securities analyst said.
• Netflix(NFLX) Blows Past Expectations; Shares Jump 15%. Netflix's fourth-quarter earnings and revenue outpaced Wall Street's expectations as the video-rental website reversed subscriber losses to sign up more than 600,000 new U.S. customers in the period.

NY Times:

• Fed Signals That a Full Recovery Is Years Away.

Washington Post:

• Philippines May Allow Greater U.S. Military Presence In Reaction To China's Rise. Two decades after evicting U.S. forces from their biggest base in the Pacific, the Philippines is in talks with the Obama administration about expanding the American military presence in the island nation, the latest in a series of strategic moves aimed at China.

Financial Times:

• Meddle With The Market At Your Peril by Alan Greenspan. Income inequality reflects globalization.
  

Telegraph:

• As Soros Says, Things Could Be Worse For The UK: We Could Be In The Euro.
• UK Heading For First Double-Dip Recession Since 1975. Britain is heading for its first double-dip recession in 37 years after the economy slumped in the final quarter of 2011 and officials warned of a new threat to jobs.
• Angela Merkel Defiant as IMF Leads Attack on Germany. German Chancellor Angela Merkel has defied calls for a radical shift in strategy to lift Europe out of crisis but is increasingly isolated as the International Monetary Fund and key global bodies join ranks to force her hand.

The Guardian:

• Angela Merkel Casts Doubt On Saving Greece From Financial Meltdown. German chancellor speaks candidly to the Guardian and five other leading European newspapers as part of a unique collaboration to explore the EU's predicament. Angela Merkel has cast doubt for the first time on Europe's chances of saving Greece from financial meltdown and sovereign default, conceding that Europe's first ever multibillion euro bailout coupled with savage austerity was not working after a two-year crisis that has brought the single currency to the brink of unravelling.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 185.50 -5.5 basis points.
  
• Asia Pacific Sovereign CDS Index 149.25 +.5 basis point.
• FTSE-100 futures +.59%.
  
• S&P 500 futures -.06%.
  
• NASDAQ 100 futures -.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CL)/1.29
• (ABC)/.63
• (ETN)/1.12
• (QSII)/.37
• (AN)/.49
• (MWW)/.11
• (NUE)/.27
• (ESI)/2.31
• (RTN)/1.34
• (UA)/.60
• (ZMH)/1.34
• (BMY)/.55
• (MMM)/1.30
• (CAT)/1.73
• (LMT)/1.95
• (T)/.43
• (MXIM)/.32
• (RHI)/.31
• (SBUX)/.39
• (KLAC)/.65
• (RVBD)/.24
• (RYL)/.09
• (JNPR)/.28
• (JBHT)/.58
• (WMS)/.30
• (CB)/1.60
• (DV)/1.00
• (BAX)/1.17
• (CRR)/1.70

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for Dec. is estimated to rise to -.10 versus -.37 in November.
• Durable Goods Orders for December are estimated to rise +2.0% versus a +3.8% gain in November.
• Durables Ex Transports for December are estimated to rise +.9% versus a +.3% gain in November.
• Cap Goods Orders Non-def Ex Air for December are estimated to rise +1.0% versus a -1.2% decline in November.
• Initial Jobless Claims for last week are estimated to rise to 370K versus 352K the prior week.
• Continuing Claims are estimated at 3500K versus 3432K prior.

10:00 am EST

• Leading Indicators for December are estimated to rise +.7% versus a +.5% gain in November.
• New Home Sales for December are estimated to rise to 321K versus 315K in November.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Kansas City Fed Manufacturing Index for January, 7Y T-Note Auction, weekly EIA natural gas inventory data, (MOH) Investor Day and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Euro Bounce, Dovish Fed Commentary, Earnings Optimism, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Mixed
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 18.35 +2.96%
  
• ISE Sentiment Index 123.0 +108.47%
  
• Total Put/Call .75 -27.88%
  
• NYSE Arms .99 -7.06%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 104.21 unch.
  
• European Financial Sector CDS Index 196.87 +1.48%
  
• Western Europe Sovereign Debt CDS Index 337.50 +.43%
  
• Emerging Market CDS Index 276.86 -1.97%
  
• 2-Year Swap Spread 33.0 -2 bps
  
• TED Spread 52.0 -1 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -74.0 +2 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .03% -1 bp
  
• Yield Curve 182.0 unch.
  
• China Import Iron Ore Spot $139.80/Metric Tonne unch.
  
• Citi US Economic Surprise Index 69.90 -.7 point
  
• 10-Year TIPS Spread 2.11 +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -9 open in Japan
• DAX Futures: Indicating +34 open in Germany

Portfolio:

• Higher: On gains in my Technology, Biotech and Medical sector longs
  
• Disclosed Trades: Covered all of my (IWM), (QQQ) hedges, then added some back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades near session highs, building on recent gains, despite rising eurozone debt angst, rising energy prices, uninspiring Fed commentary and profit-taking. On the positive side, Coal, Ag, Medical, Biotech, Construction, Homebuilding, Gaming, Road & Rail and Airline shares are especially strong, rising more than +1.5%. "Growth" stocks are substantially outperforming "value" shares. Copper is rising +.98%, the UBS-Bloomberg Ag Spot Index is down -.28% and Lumber is gaining +1.74%. Despite today's +.55% gain, oil continues to trade poorly given the recent uptick in saber-rattling from Iran, escalating violence in Nigeria, better US economic data and euro bounce. The Ireland sovereign cds is falling - 3.72% to 634.0 bps. On the negative side, Paper, Internet, HMO, I-Banking, Networking and Defense shares are lower on the day. Gold is soaring +2.75%. The Portugal sovereign cds is up +2.0% to 1,313.33 bps(+25% in 9 days to new record high) and the Italy sovereign cds is rising +1.62% to 440.83 bps . The Italian/German 10Y Yield Spread is rising +2.67% to 428.64 bps. The weekly MBA Purchase Applications Index fell -5.4% this week and is still in the same range as it has been trapped in since May 2010. Lumber has declined -12.3% since its Dec. 29th high and is still near the lower end of its recent range, near a multi-year low, despite the better US economic data, improving sentiment towards homebuilders, stock rally and decline in eurozone debt angst. Moreover, the Baltic Dry Index has plunged over -60.0% from its Oct. 14th high and is now down over -50.0% ytd. The 10Y T-Note Yield is falling -7 bps to 1.99%, which remains a large concern considering the recent stock rally and improvement in US economic data. The Western Europe Sovereign CDS Index is still near its Jan. 9th all-time high. The TED spread is near the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is near the highest since February 2009. The Libor-OIS spread is still very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. Overall, while improving, European credit gauges are still at stressed levels. China Iron Ore Spot has plunged -22.8% since Sept. 7th of last year. Shanghai Copper Inventories are up over 300.0% ytd to the highest level since March of last year. European shares were about -.50% lower on the day with the Bloomberg European Bank/Financial Services Index falling -.16%. European equities continue to price in a pause in the debt crisis and a stabilization in economic growth. While the "debt crisis can" appears to have been kicked again, economic growth is likely to contract further in the region over the coming months as more austerity measures take hold. Investors are cheering the Fed's dovish commentary today as they continue to exude weakness in the face of a meaningful improvement in US economic data. While weak dollar policies are usually short-term bullish for stocks/commodities, I continue to believe that they are extremely destructive to the long-term health of the US economy/stock market. The S&P 500's technical condition should lead to further gains after a brief pause. For a sustainable equity advance from current levels, I would still expect to see further European credit gauge improvement, subsiding hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. One of my longs, (AAPL), is surging +6.2% to an all-time high after blow-out earnings and an unusual guidance raise. The shares are very extended short-term. However, I still expect significant market outperformance in the stock over the intermediate-term. As I said when it was initially released, the iPad is Apple’s Trojan horse into the enterprise. I still think the analyst community underestimates the implications of this massive opportunity over the longer-term. I expect US stocks to trade modestly higher into the close from current levels on a bounce in the euro, earnings optimism, dovish Fed commentary and short-covering.